Cryptocurrency trading is often compared to Forex trading. Forex is all about trading currencies. However, both the worlds are completely different. While forex trading is a big, well-established practice, crypto trading is quite new to the world. Forex trading may involve broker, middlemen and institutes which take fees during trading.
The absence of middleman is the largest drawback of cryptocurrency trading. Another important point to discuss is that liquidity available in both the markets. Once you choose the uncommon crypto coins, there is not liquidity at all. Then the next feature is security. Let’s compare the two in detail.
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Currency vs. Cryptocurrency
Forex trading is gigantic. The daily turnover rate for Forex is in trillions in which alone USD was traded $5 trillion in 2016. On the other hand, Bitcoin only has a trading turnover of $1billion. Bitcoin trading is not even as big as Swiss Franc trading in forex exchange which is responsible for 5% of the trading volume and has a turnover of $243 billion daily.
However, crypt gives you a return of more than 70% on daily basis unlike forex. Yes, the returns are extremely high in crypto.
As Forex trading is established, it has a mature and regulated market. It means that forex trading can get costlier and there may be hidden costs before you covert your dollars to profit. Hence, it means you need to have a substantial capital to trade in forex. Unlike crypto, traders in Forex have to compete with giant central and reserve banks, high frequency traders and other financial firms. This involves great competition.
Stability and Volatility
Forex doesn’t have the volatility present in crypto, making it tough to take benefits of small differences in the exchange rate. However, it has easily available liquidity which means you can trade any currency for another and your order will be executed within seconds. The liquidity of Forex also ensures that even billion-dollar trades will not overly change the asking price of a particular trade. But in crypto trading, bulk trades can impact the price.
Based on the experiences of StsRoyal safety is one of the biggest differences between the two. Cryptocurrency has all the risk linked with it along with rising tech. There are several stories about digital coins getting stolen, hacked or just lost. And, crypto trading also lacks regulations. Hence, this leaves traders open to fraudulent and scams. However, forex is a securer way to trade and it is usually insured by the government during theft or fraud.
What should you go for?
Both forex and crypto have their own advantages and disadvantages and their own risks and rewards. But still Forex is more stable, securer and well-regulated and, though cryptocurrency trading promises large returns than Forex, but still it is at the cost of stability. Hence, you need to have better understanding of trading and the potential to bear risks to earn such high profits in crypto.
Both the markets are more or less same and involve electronic trading. But traders need completely different strategies to trade in the two.